IDEAS home Printed from https://ideas.repec.org/a/aea/aejmic/v13y2021i2p68-112.html
   My bibliography  Save this article

Exit, Tweets, and Loyalty

Author

Listed:
  • Joshua S. Gans
  • Avi Goldfarb
  • Mara Lederman

Abstract

Hirschman's Exit, Voice, and Loyalty highlights the role of "voice" when individuals confront an unexpected deterioration in quality. Yet, voice has received little attention. To motivate our empirical analysis, we develop a simple model of voice as the equilibrium of a relational contract between customers and firms. We use data on 4 million tweets to or about US airlines to study the relationship between quality, voice, and market structure. Voice increases when quality deteriorates. This relationship is greater for airlines that operate a large share of flights in a market. Supplemental analyses support a relational contracting role for voice.

Suggested Citation

  • Joshua S. Gans & Avi Goldfarb & Mara Lederman, 2021. "Exit, Tweets, and Loyalty," American Economic Journal: Microeconomics, American Economic Association, vol. 13(2), pages 68-112, May.
    • Handle: RePEc:aea:aejmic:v:13:y:2021:i:2:p:68-112
    DOI: 10.1257/mic.20180085
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/doi/10.1257/mic.20180085
    Download Restriction: no
    File URL: https://doi.org/10.3886/E118701V1
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/mic.20180085.appx
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/mic.20180085.ds
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    File URL: https://libkey.io/10.1257/mic.20180085?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Dina Mayzlin & Yaniv Dover & Judith Chevalier, 2014. "Promotional Reviews: An Empirical Investigation of Online Review Manipulation," American Economic Review, American Economic Association, vol. 104(8), pages 2421-2455, August.
    2. King, Gary & Zeng, Langche, 2001. "Logistic Regression in Rare Events Data," Political Analysis, Cambridge University Press, vol. 9(2), pages 137-163, January.
    3. Claes Fornell & Birger Wernerfelt, 1988. "A Model for Customer Complaint Management," Marketing Science, INFORMS, vol. 7(3), pages 287-298.
    4. Mara Lederman, 2007. "Do enhancements to loyalty programs affect demand? The impact of international frequent flyer partnerships on domestic airline demand," RAND Journal of Economics, RAND Corporation, vol. 38(4), pages 1134-1158, December.
    5. Young, Dennis R, 1976. "Consolidation or Diversity: Choices in the Structure of Urban Governance," American Economic Review, American Economic Association, vol. 66(2), pages 378-385, May.
    6. Severin Borenstein, 1991. "The Dominant-Firm Advantage in Multiproduct Industries: Evidence from the U. S. Airlines," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(4), pages 1237-1266.
    7. Raj Chetty & John N. Friedman & Jonah E. Rockoff, 2014. "Measuring the Impacts of Teachers I: Evaluating Bias in Teacher Value-Added Estimates," American Economic Review, American Economic Association, vol. 104(9), pages 2593-2632, September.
    8. David Godes & Dina Mayzlin, 2004. "Using Online Conversations to Study Word-of-Mouth Communication," Marketing Science, INFORMS, vol. 23(4), pages 545-560, June.
    9. Severin Borenstein, 1989. "Hubs and High Fares: Dominance and Market Power in the U.S. Airline Industry," RAND Journal of Economics, The RAND Corporation, vol. 20(3), pages 344-365, Autumn.
    10. David Godes & Dina Mayzlin, 2009. "Firm-Created Word-of-Mouth Communication: Evidence from a Field Test," Marketing Science, INFORMS, vol. 28(4), pages 721-739, 07-08.
    11. Mara Lederman, 2008. "Are Frequent‐Flyer Programs a Cause of the “Hub Premium”?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(1), pages 35-66, March.
    12. Jeremy Adelman, 2013. "Worldly Philosopher: The Odyssey of Albert O. Hirschman," Economics Books, Princeton University Press, edition 1, number 9935.
    13. Amalia R. Miller & Catherine Tucker, 2013. "Active Social Media Management: The Case of Health Care," Information Systems Research, INFORMS, vol. 24(1), pages 52-70, March.
    14. Williamson, Oliver E, 1976. "The Economics of Internal Organization: Exit and Voice in Relation to Markets and Hierarchies," American Economic Review, American Economic Association, vol. 66(2), pages 369-377, May.
    15. Liye Ma & Baohong Sun & Sunder Kekre, 2015. "The Squeaky Wheel Gets the Grease—An Empirical Analysis of Customer Voice and Firm Intervention on Twitter," Marketing Science, INFORMS, vol. 34(5), pages 627-645, September.
    16. Jonathan Levin, 2002. "Multilateral Contracting and the Employment Relationship," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(3), pages 1075-1103.
    17. T. Randolph Beard & Jeffrey T. Macher & John W. Mayo, 2015. "'Can you Hear Me Now?' Exit, Voice and Loyalty Under Increasing Competition," Journal of Law and Economics, University of Chicago Press, vol. 58(3).
    18. Dina Mayzlin, 2006. "Promotional Chat on the Internet," Marketing Science, INFORMS, vol. 25(2), pages 155-163, 03-04.
    19. Freeman, Richard B, 1976. "Individual Mobility and Union Voice in the Labor Market," American Economic Review, American Economic Association, vol. 66(2), pages 361-368, May.
    20. Silke J. Forbes, 2008. "The Effect Of Service Quality And Expectations On Customer Complaints," Journal of Industrial Economics, Wiley Blackwell, vol. 56(1), pages 190-213, March.
    21. Horrace, William C. & Oaxaca, Ronald L., 2006. "Results on the bias and inconsistency of ordinary least squares for the linear probability model," Economics Letters, Elsevier, vol. 90(3), pages 321-327, March.
    22. Chris Nosko & Steven Tadelis, 2015. "The Limits of Reputation in Platform Markets: An Empirical Analysis and Field Experiment," NBER Working Papers 20830, National Bureau of Economic Research, Inc.
    23. Jan Brueckner & Darin Lee & Ethan Singer, 2014. "City-Pairs Versus Airport-Pairs: A Market-Definition Methodology for the Airline Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(1), pages 1-25, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Achyuta Adhvaryu & Teresa Molina & Anant Nyshadham, 2019. "Expectations, Wage Hikes, and Worker Voice: Evidence from a Field Experiment," NBER Working Papers 25866, National Bureau of Economic Research, Inc.
    2. Judith A. Chevalier & Yaniv Dover & Dina MayzlinDina Mayzlin, 2018. "Channels of Impact: User Reviews When Quality Is Dynamic and Managers Respond," Marketing Science, INFORMS, vol. 37(5), pages 688-709, September.
    3. Daniel Levy & Andrew T. Young, 2021. "Promise, trust, and betrayal: Costs of breaching an implicit contract," Southern Economic Journal, John Wiley & Sons, vol. 87(3), pages 1031-1051, January.
    4. Bertschek, Irene & Kesler, Reinhold, 2022. "Let the user speak: Is feedback on Facebook a source of firms’ innovation?," Information Economics and Policy, Elsevier, vol. 60(C).
    5. Sunghun Chung & Animesh Animesh & Kunsoo Han & Alain Pinsonneault, 2020. "Financial Returns to Firms’ Communication Actions on Firm-Initiated Social Media: Evidence from Facebook Business Pages," Information Systems Research, INFORMS, vol. 31(1), pages 258-285, March.
    6. Behrens, Christiaan & de Jong, Gerben & van Ommeren, Jos, 2024. "From silver to platinum: The impact of frequent flier tier levels on air travellers’ behaviour," Transportation Research Part B: Methodological, Elsevier, vol. 186(C).
    7. Devesh Raval, 2020. "Whose Voice Do We Hear in the Marketplace? Evidence from Consumer Complaining Behavior," Marketing Science, INFORMS, vol. 39(1), pages 168-187, January.
    8. Ramah Al Balawi & Yuheng Hu & Liangfei Qiu, 2023. "Brand Crisis and Customer Relationship Management on Social Media: Evidence from a Natural Experiment from the Airline Industry," Information Systems Research, INFORMS, vol. 34(2), pages 442-462, June.
    9. Mara Lederman, 2018. "Comment on "The Impact of Machine Learning on Economics"," NBER Chapters, in: The Economics of Artificial Intelligence: An Agenda, pages 548-551, National Bureau of Economic Research, Inc.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Weijia (Daisy) Dai & Ginger Jin & Jungmin Lee & Michael Luca, 2018. "Aggregation of consumer ratings: an application to Yelp.com," Quantitative Marketing and Economics (QME), Springer, vol. 16(3), pages 289-339, September.
    2. Volodymyr Bilotkach, 2015. "Are airports engines of economic development? A dynamic panel data approach," Urban Studies, Urban Studies Journal Limited, vol. 52(9), pages 1577-1593, July.
    3. Mingwen Yang & Zhiqiang (Eric) Zheng & Vijay Mookerjee, 2019. "Prescribing Response Strategies to Manage Customer Opinions: A Stochastic Differential Equation Approach," Information Systems Research, INFORMS, vol. 30(2), pages 351-374, June.
    4. Luttmann, Alexander, 2019. "Evidence of directional price discrimination in the U.S. airline industry," International Journal of Industrial Organization, Elsevier, vol. 62(C), pages 291-329.
    5. Bet, Germán, 2021. "Product specification under a threat of entry: Evidence from Airlines’ departure times," International Journal of Industrial Organization, Elsevier, vol. 75(C).
    6. Christiaan Behrens & Nathalie McCaughey, 2015. "Loyalty Programs and Consumer Behaviour: The Impact of FFPs on Consumer Surplus," Tinbergen Institute Discussion Papers 15-048/VIII, Tinbergen Institute.
    7. Gayle, Philip G. & Wu, Chi-Yin, 2013. "A re-examination of incumbents’ response to the threat of entry: Evidence from the airline industry," Economics of Transportation, Elsevier, vol. 2(4), pages 119-130.
    8. Khim-Yong Goh & Cheng-Suang Heng & Zhijie Lin, 2013. "Social Media Brand Community and Consumer Behavior: Quantifying the Relative Impact of User- and Marketer-Generated Content," Information Systems Research, INFORMS, vol. 24(1), pages 88-107, March.
    9. Jörg Claussen & Christian Essling & Christian Peukert, 2018. "Demand variation, strategic flexibility and market entry: Evidence from the U.S. airline industry," Strategic Management Journal, Wiley Blackwell, vol. 39(11), pages 2877-2898, November.
    10. Alessandro Gavazza, 2011. "Demand spillovers and market outcomes in the mutual fund industry," RAND Journal of Economics, RAND Corporation, vol. 42(4), pages 776-804, December.
    11. Erfan Rezvani & Christian Rojas, 2022. "Firm responsiveness to consumers' reviews: The effect on online reputation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(4), pages 898-922, November.
    12. Ciliberto, Federico & Williams, Jonathan, 2010. "Does Multimarket Contact Facilitate Tacit Collusion? Inference on Conjectural Parameters in the Airline Industry," MPRA Paper 24888, University Library of Munich, Germany.
    13. Diego Escobari, 2011. "Frequent flyer programs premium and the role of airport dominance," Applied Economics Letters, Taylor & Francis Journals, vol. 18(16), pages 1565-1569.
    14. Thaís L. D. Souza & Marislei Nishijima & Ana C. P. Fava, 2019. "Do consumer and expert reviews affect the length of time a film is kept on screens in the USA?," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 43(1), pages 145-171, March.
    15. Agostini, Claudio A. & Inostroza, Diego & Willington, Manuel, 2015. "Price effects of airlines frequent flyer programs: The case of the dominant firm in Chile," Transportation Research Part A: Policy and Practice, Elsevier, vol. 78(C), pages 283-297.
    16. Ana Babić Rosario & Kristine Valck & Francesca Sotgiu, 2020. "Conceptualizing the electronic word-of-mouth process: What we know and need to know about eWOM creation, exposure, and evaluation," Journal of the Academy of Marketing Science, Springer, vol. 48(3), pages 422-448, May.
    17. Williams, Martin & Buttle, Francis, 2011. "The Eight Pillars of WOM management: Lessons from a multiple case study," Australasian marketing journal, Elsevier, vol. 19(2), pages 85-92.
    18. Alderighi, Marco & Gaggero, Alberto A. & Piga, Claudio A., 2015. "The effect of code-share agreements on the temporal profile of airline fares," Transportation Research Part A: Policy and Practice, Elsevier, vol. 79(C), pages 42-54.
    19. A. Yeşim Orhun & Tong Guo & Andreas Hagemann, 2022. "Reaching for Gold: Frequent-Flyer Status Incentives and Moral Hazard," Marketing Science, INFORMS, vol. 41(3), pages 548-574, May.
    20. David Godes, 2017. "Product Policy in Markets with Word-of-Mouth Communication," Management Science, INFORMS, vol. 63(1), pages 267-278, January.

    More about this item

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aejmic:v:13:y:2021:i:2:p:68-112. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.